New Delhi, October 7 (Daily Kiran) : The Reserve Bank of India (RBI) might increase the repo rate by up to 50 basis points in its upcoming monetary policy meeting in December, according to a report released by SBI Research. This potential hike largely hinges on global economic conditions.
SBI’s Group Chief Economic Advisor, Dr. Soumya Kanti Ghosh, stated that raising the repo rate to 6 percent by December could be the most prudent choice. The report noted that the RBI’s recent decision to raise the repo rate by 25 basis points to 5.50 percent was a consensus move, and future policy options may be limited to either further rate hikes or maintaining the current rate, depending on evolving circumstances.
Dr. Ghosh also highlighted that the RBI has revised its GDP growth forecast for FY27, increasing it by 40 basis points to 7.1 percent, while the retail inflation estimate has been adjusted upward by 20 basis points to 5.20 percent. He anticipates that GDP growth could reach 7.5 percent in the second quarter of FY27.
Beyond the repo rate, Dr. Ghosh remarked that discussions surrounding the October policy indicate a shift from caution to a more aggressive stance. An analysis of the Governor’s statements and the monetary policy report suggests a notable consistency in their approach, contrasting with previous policy cycles.
The report further emphasized the need for a clear AI policy in India to facilitate capital flow, as uncertainty in policy could hinder investments. Additionally, it pointed out the necessity for protective measures for the rupee, which is trending towards concerning benchmarks.
SBI’s analysis of previous policy cycles indicates that the scope for increasing interest rates is determined by the intensity and duration of inflationary pressures. Interestingly, as inflationary conditions softened in past cycles, the peak policy rates also decreased. The report predicts that inflation could peak at around 6.8 percent in November 2026, suggesting a potential peak repo rate of about 6.0 percent. However, the pace and extent of rate hikes may vary significantly based on shifts in inflation trends, with the speed of tightening also being a crucial factor.
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